Family offices tend to be astute investors with moderate risk appetite in their asset allocation. But if they are convinced about an idea they are happy to put a lot of their eggs in one basket, a study revealed.
Family offices on average are smaller firms that manage assets of one or several wealthy families. The main aim of the investment strategy is to preserve the capital, which leads to a more cautious and yet innovative investment approach. Families obviously also appreciate an annual return from their assets.
ESG Not So Popular
The family offices’ asset allocation tends to be a fair indication of which type of investment is popular in the financial market. Unfortunately, family offices are not generally very open about their asset allocation.
The «BFZ Family Office Studie 2019» is providing an interesting insight into this business. The study was conducted by Bayerisches Finanz Zentrum, together with Axa Investment Managers, Blackrock, Commerzbank, and Noerr law firm.
Positive Market Sentiment to Prevail
One of the main findings of the study is that family offices are very cautious about investments that conform to so-called ESG criteria. This seems to suggest that the rich haven’t been swayed by the huge marketing blitz orchestrated by the banking industry.
The second major finding shows that family office managers expect positive sentiment in the markets to persist thanks to the prevalence of low-interest rates. They also said that they will increase their exposure to private equity.
Private Equity: Promising Performance
Private equity requires a wealth of insight and promises significant returns, higher than what can be expected from conventional equity or bond investments. Many family offices are well equipped to pick and choose among products available in private equity.
Rich families evidently tend to have good contacts to business circles and know where new investment opportunities arise. Which explains why private equity is so popular with family offices and their clients. The authors of the study spoke to 51 family offices, most of which were based in Switzerland and Germany, and two from Austria.
